The NBN Pricing Overhaul – What Does It Mean for You?

You might be surprised to learn that the National Broadband Network – the NBN – has now been up and running for over half a decade. Like any major infrastructure project, it started slow (lots of planning and groundwork) and it’s only now that they’re properly rolling out the service to a large percentage of the population.

As a result, it took a while for some of the problems with the NBN’s pricing model – the way it charges your Internet provider for your connection – to reveal themselves. Unless you spend a lot of time reading more technical websites and blogs, you might have been frustrated by slow connection speeds and Netflix buffering in the evening peak hours and blamed it all on the stuff that makes the newspaper headlines.

Yes, it’s true that there have been multiple issues caused during the NBN rollout. Aside from the usual teething problems, the sudden change mid-way through to a “multi-technology model” instead of an all-fibre network has certainly led to a poor performance for some customers, especially those on Fibre to the Node connections. But there’s been another issue that’s been obvious for some time to industry insiders, and only recently has it started to make waves.

The Pricing Problem

The Rudd Labor government of the day wanted to fund the NBN “off budget”. This meant not putting a $42 billion hole in the national coffers and so from the start, the idea behind this was that the NBN would pay for itself within a number of years and eventually make a profit. With that in mind, NBNco (as they were known then) set up a pricing structure that would eventually become a pain point for Internet providers and, eventually, you the consumer.

Their idea was to charge more based on how fast a connection you wanted, rather than just connecting everyone at maximum speed. They then charged the provider for what’s known as CVC – basically, the total speed of the provider’s pipe into the NBN. This had an unintended effect because while the presumption was that those who wanted speed would pay for a more expensive plan, the vast majority of customers opted for the two lowest speed tiers, which aren’t any faster than the best ADSL.

The reason for this was partly the basic pricing that providers had to work with. If you wanted the top speed (at the time, 100 Mbps), you’d have to expect to pay a lot per month because the cost to the provider was so high. And customers coming to the NBN from $40 unlimited-download ADSL plans weren’t about to pay extra just because they were told to, especially when politicians were telling them that 25 Mbps was “fast enough for Netflix”!

Internet providers started shifting customers over to the NBN in large numbers by offering unlimited downloads to entice them over, but without paying for enough bandwidth (CVC) because the profit margins were so slim compared to ADSL. The end result? Too many users with not enough download speed between them to keep things streaming smoothly.

Australia NBN Coverage Map

The Pricing Fix – Why It Matters to You

Faced with increasing criticism as the ACCC and consumer organisations, like Choice, started focussing on the pricing structure as the root of the problem, NBN offered up a Christmas present to Internet providers and their customers at the end of 2017.

The price your provider pays for the faster 50/20 speed – which matches the typical speeds that FTTN connections are capable of reaching – was cut drastically to encourage providers to move their customers to the higher speed without paying more, and while also making things more profitable for the provider at the same time.

This move encourages Internet providers to move customers up to that speed at no extra cost, as many have already done. And it also encourages them to pay for sufficient bandwidth to ensure those speeds are actually possible, which is good news for you as a customer.

There’s been a lot of newspaper coverage about the whole speed issue thanks to the ACCC’s agitation. And aside from prompting the NBN to rethink their pricing to providers, it’s also encouraged those providers to be more honest about speeds with their customers. Instead of promising you’ll get the maximum speed of a connection, they now tell you (in very general terms) how fast you can expect it to be at the evening peak, making it easier to choose a provider that’s got the balance right.

Still to Come

Later in 2018, NBN will move into phase two of their pricing revamp. This time, the idea is to introduce plans that come with guaranteed speeds rather than vague estimates – great news for consumers once again, since you’ll know before you even sign up what you’ll be getting out of your NBN broadband connection.

It’s been a long and rocky road so far, but as the NBN rollout ramps up, the service is starting to take a form that actually makes sense for everyone – Internet providers and end users alike. For now, take a look at your current provider’s plans (or give them a call) to see if you can upgrade your speed for free, or in some cases, pay less than you were. And expect even more changes later in 2018 that promise to make your relationship with the NBN a far happier one!